In his much-maligned comments on the “47 percent,” Republican Presidential nominee Mitt Romney raised, however inarticulately, an important question for this presidential election: Who actually pays the taxes that power the federal government?

This question is important because President Obama’s economic platform is based on the premise that over the past decade tax cuts have only benefited the rich and that, therefore, taxes should be raised on upper income earners so that the rich pay their fair share. But a review of who exactly pays taxes – and by how much – illustrates that the factual basis of President Obama’s theme is simply not true.

Several recent studies have estimated that around one-half of the population does not pay any personal income tax. For example, the Tax Policy Center recently found that 46 percent of all households did not owe any federal income tax in 2011, while a study by the Joint Committee on Taxation found that 51 percent of all households did not pay any income tax in 2009. The majority – but not all - of these households are from the lowest income-earning households.

This might seem implausible – doesn’t everyone pay some payroll taxes? They do. But there is a problem with viewing payroll taxes, such as Social Security taxes, as general revenue for the government; that’s because the government must return this money to the person who paid the Social Security taxes at some point in the future. Social Security is supposedly a way for workers to invest in their own retirement through mandatory “tax contributions.”

Every dollar collected in Social Security benefits is, therefore, contract bound to a future Social Security expense; and yet, because payroll contributions are collected under the name “payroll taxes,” some analysts will include these taxes as part of the overall tax burden.

The Congressional Budget Office (CBO), for instance, includes payroll taxes as well as corporate income and federal excise taxes in its annual tax estimates. But what happens if you take these payroll taxes out of the equation – how fair or unfair does the tax burden look then?

When did this, and then re-analyzed the CBO data to estimate the average federal tax rate, we found the bottom 20 percent of income earners have been facing a net negative average federal tax rate since 1994 (see the table below). In other words, once payroll taxes are excluded, federal tax revenues have actually been a source of income for the bottom 20 percent of the income earners for nearly two decades.

One way of understanding how this occurs is to examine the impact of tax credits on lower income tax rates. In 2011, a single adult with two children earning $20,000 a year in income would have had to pay around $2,000 in federal income tax. But the household would also have been eligible for an Earned Income Tax Credit (EITC) which would have given them a refund of about $4,400, meaning they would have gotten all that tax back, plus an extra $2,400, from the government. (Corporate tax breaks work in the same way)

This is also a reflection of how the federal tax system has been highly progressive for the past 30 years. In 1979, the average tax rate faced by the top 1 percent of income earners was 34.1 percent; the bottom 20 percent faced an average tax rate of 2.6 percent. By 2009, the top 1 percent faced an average tax rate of 26.4 percent; the bottom 20 percent received money from the tax system (their credits gave them an average tax rate of -7.3 percent).

Due to changes in the tax laws that were enacted in 2007, the bottom 40 percent of income earners have become net recipients of tax revenues since 2008. Another way of looking at it is that the only money the bottom 40 percent of income earners are now paying, on average, into the federal government are Social Security payments, which are a form of forced savings for themselves.

So where is this money coming from? Well, where else can it come from than from those in the higher income quintiles given that the top 40 percent of income earners fund 86 percent of total federal expenditures? When you factor out social security payments, the households that earn the least in the US not only do not pay federal taxes, our tax system redistributes money from the top to provide them with a supplemental income stream.

In terms of the election, these results contradict the claim that upper-income households are the only group to have benefited from tax cuts. In fact, upper income households still face significantly higher average tax rates than lower income households. Consequently, one of President Obama’s key economic premises that the tax burden on the rich is too small relative to lower income households is factually incorrect.

Wayne Winegarden, Ph.D. is a contributor to EconoSTATS at George Mason University, a Senior Fellow with Pacific Research Institute, and a Partner at the economic consulting firm, Arduin, Laffer& Moore Econometrics. Donald Rieck is Executive Director and Managing Editor of the Statistical Assessment Service(STATS) and EconoSTATS contributor.